Treasury Today Country Profiles in association with Citi
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March 2002

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Is technology a real substitute for a handshake?

“Sorry, I can’t talk any more I’ve got to go and collect the kids from school”. So ended the telephone conversation that was made whilst we were investigating a very impressive new derivatives website. We thought we were dealing with their office and talking to the technical director. We probably were but we did not realise that he worked from home (because he did not need to have an office in the City).

The lesson, of course, is to make sure that you know with whom you are dealing. Although the net is a wonderful communication medium, impressive websites can be, and sometimes are, fronts for very insubstantial operations. Virtual companies can be just that.

Does this matter? Sometimes it does and sometimes it doesn’t. The web has enabled many new commercial relationships to develop and has disintermediated many others. But where these relationships imply trusting the other party to deliver something, the substance of the operation begins to matter. When a service is delivered instantly over the web, it is easy to rely on it; any subsequent disruption of the service will matter.

This episode has reminded us of the need to get behind the hype of the hyperlink and determine with whom we are dealing. How confident are you on this?

Richard Parkinson